Personal Vs. Corporate Credit
If I were to form a corporation for the purposes of purchasing investment property would my personal credit be a factor in determining mortgage approval?
Or would it simply be based on financial statments. And being a new corp/business would it be possible for the corporation to secure loans without a history?
I'm asking because I'm really motivated to get into the business however my personal credit is a wreck and was wondering if using a LLC or C/S corp would be the way to go.
Particularly if I get partners,
Thanks in advance,
PJ
It is a way to go but in the beginning you will carry the load personally as opposed to the business. Beginning investing can be done (birddog, wholesale, sub-to) without pers. credit checks and give yourself time to build a reputation and a cashflow.
Your goal is to clean up your credit and to build a strong company. It is going to require dual effort for longevity. Do some searches on the board to find which route in investing suits you best and handle yourself accordingly to rebuild/build personal/business credit.
I will add this, as a start up company make sure you get a business phone number (listed as biz in yellow pages) and fax number. You can use that to get your DnB number and from there use the telephone company as a reference DnB credit rep. Next seek a tradeline with Stapes, Home Depot, Sam's Club, maybe T-Mobile. Make some charges, pay the balance (not necessarily in full) then DnB should give you a score. From there you might seek to do business with local vendors to add to your CR to increase your biz credit history. The higher your score and the longer the history the less likely you will be requested to personally garauantee on lines of credit, business loans, etc...
It is not necessary to get a listing in the yellow pages (that is very expensive) you can get the same by putting the phone number in the white pages as a business name. Open an account at the bank, and get a federal tax id number. A corporation is like a person it needs to grow and build credit just like you do.
There is an easier way however; A. you can buy an aged shelf corporation that already has a D&B rating. Or B. find someone who is wanting to go out of business etc. and buy their corp from them (usually 2-4K) make sure it is clean, has no tax liens etc. and check the D&B rating. THis would catapult you forward in the finance game as it would show longetivity etc.
In Oregon it costs $25 and about an hour to start a corp. At times it might be worth starting one, putting $500 in the business bank account, and letting it age (and use the techniques mentioned above such as credit lines etc.)
[addsig]
Thanks for the advice, it will be well heeded.
PJ